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    The question has come up if current contractor has facilities on the installation for their HR department, finance, IT and security departments can we on the next contract require them to provide their own facilities of post at no cost to the Government? The next contract will be a CR under 52.245-1. Currently all employees are indirect. Would the Government be required to pay a lease or rent to cover the cost of having the contractor provide their own facilities. Could the contractors bid be high becasue they have to provide their own facilities.


    Yes you can require the contractor to provide their own facilities off post, but not necessarily at no cost to the government. 
    Generally for service contractors working on post, the government provides work/office space only for those employees directly supporting the contract tasks who need to be located on the post.  But other contractor employees who do not directly perform contract related tasks typically do not need to be on post and can be at the contractor’s normal off post location.  This could be in the local area or several states away depending on the nature of the work.  Some service contracts require that the contractor maintain a local office within a specified distance from the post;  for example within 25 miles.

    If the contractor employees are performing administrative tasks (and not a direct contract task) then they would typically be charged to the contractor’s overhead rather than as a direct charge to the contract.  You indicate in your question that the “employees are indirect”, so they should be part of the contractor’s overhead.

    You also ask if the government should “pay a lease or rent to cover the cost of having the contractor provide their own facilities”.  The type support you indicate in your question (HR department, finance, IT and security) are general business expenses which are typically part of the contractor’s overhead and not a direct contract charge.  So their facilities would also typically be an overhead expense rather than a direct charge.

    Lastly, you ask “could the contractor’s bid be high because they have to provide their own facilities”.  Contractor facility costs will certainly impact their overhead rates; a portion of which will be allocated to your contract under a cost reimbursement contract.  It  is also important to remember that there are costs associated with providing Government facilities.

    I recommend you coordinate with your contracting officer as you further develop your acquisition strategy.

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